The allure of the “new” is unmistakable. In fact, a study shows that it’s part of our psychological makeup to believe that new must always equal improved.
It is only natural to be continually on the lookout for ways to lure the next potential customer, but focusing too hard on acquisition may be to your detriment. As sales departments clamor for more resources to cultivate more outreach, the question should be: What about those customers we already have? Are they inferior to new customers, or are they perhaps significantly more valuable?
According to numbers procured by Invesp, 44 percent of companies admit they focus more on acquisition than retention, and only 18 percent claim to focus more on retention. However, the same research points to the idea that customer retention is far more financially sound.
The research demonstrated that:
- Acquiring a new customer is five times more expensive than retaining an existing one.
- Increasing customer retention rates by five percent increases profits by 25 to 95 percent.
- The success rate of selling to a customer you already have is 60 to 70 percent, while the success rate of selling to a new customer is five to 20 percent.
- Customer retention is crucial for forecasting consistent growth in financial planning. If you can count on committed customers returning for the next financial quarter, anticipatory budgetary decisions are easier to make.
So how do you make sure you focus on retention? There’s a great deal of data-driven information regarding useful strategies to employ when considering retention protocol. Some of these are psychologically based, and some are just good business. However, all these ideas boil down to one concept: Give your clients a specific reason to trust in your company, and they will remain loyal, happy, and enthusiastic about your brand.
You may have heard this business truism before, but it bears repeating here. We want to ingratiate ourselves with clients, so we often over-promise and then underwhelm a client with deliverables. Even if we deliver exactly what was promised, it is a lost opportunity.
Setting customer expectations too high has no value, whereas surprising clients with over-performance creates a moment of attachment to your brand that has value. Cultivating a moment of personal connection that goes beyond expectations gives a client the understanding that you are giving them individualized care and attention. Some ways to underpromise include:
- Timing: While it’s important to attend to client needs as fast as possible, always significantly overestimate the amount of time it will take. If the task will take ten minutes, offer an hour; if it might take an hour, say you will get it done by the next day. By delivering much faster than offered, it gives the client reason to feel your investment in them specifically.
- Amounts: Underestimate returns on investment if possible, then deliver higher returns than expected.
- Resources: Deliver more time and people to accomplish a project than you promised, and clients will be impressed with your devotion to them.
You know the piece of candy you sometimes get with the check at the end of your meal? Did you know that was also a sweet piece of psychological warfare? A 2002 paper in The Journal of Applied Social Psychology looks at how delivering extra candy increases tips, and how it engages a reciprocity response. It also points to another strategy that you can use to help keep your customers happy.
Ways to reciprocate that increase retention include:
- Actively promote a client’s business through your own channels.
- Give to causes that your customers believe in. 37 percent of customers say they are loyal to companies that support a shared cause.
- Pay attention to (or investigate) a client’s favorite music, sports, hobby, or food, and invest a small amount to deliver a special gift related targeted to their taste.
Reciprocity creates a psychological response: a desire to continue to work with you, because of the feeling that tangible favors should be returned. Even small gestures, like a little extra candy, can stimulate this response.
A huge motivating factor in client retention is giving them a surprisingly positive experience based on their individual needs. Clients want to be listened to, and showing you’ve paid attention can pay huge dividends.
Martin Lindstrom, branding expert and highly regarded author, tells an anecdote about how, when staying at a hotel, the concierge purchased him CDs of his favorite artists. It cost the hotel less than $25, but he’s told that story thousands of times in front of crowds of businesses, basically giving them large-scale free advertising. They got this free marketing because of one small gesture that demonstrated that they were listening.
Even clients with negative experiences can become your best customers if you listen carefully to their feedback and implement changes based on their advice. 97 percent of customers are more likely to be loyal if they feel their voice was heard and real change was accomplished.
Ways to foster joy include:
- Pay attention to customer service: Giving great customer service is the best way to give clients joyful experiences. According to research, over 85 percent of companies say that efforts to improve customer experiences have positive business impact.
- People love the sound of their own name: Make sure that customer service representatives ask for and use the names of the people they speak with.
- Share common values: 64 percent of clients say “shared values” are a major reason for loyalty.
- Offer targeted incentives: As in Mr. Lindstrom’s story, proof that your company is listening can also be in the form of small offers that you know cater to specific clients.
Another way a current client is more valuable than a new one is that each client already has a volunteer job in your company: They are a potential salesperson.
You earn your customers’ loyalty when they feel they have a stake in your success, so giving them opportunities to take responsibility is key. Also, word of mouth is one of the most important elements in marketing your business, and a happy client can be a better referral than any advertisement or discount offer. Think of your clients as part of your sales team, and you can more easily accomplish growth.
Ways to create brand ambassadors:
- Give them the opportunity to send feedback whenever possible, including surveys, evaluations, and focus groups.
- Have incentive programs for current clients who bring in new and related business.
- Create loyalty programs tailored for your most enthusiastic customers. Over 50 percent of customers say that personalized incentives make them more likely to remain loyal.
The effect that retaining a client has over the years is called Customer Lifetime Value. It is a metric that may be difficult to quantify, but is imperative to consider. This value increases greatly with your efforts to deepen relationships. Are there clients you have already that can do some of your acquisition work for you, if treated properly? Are there clients that will give you discounts on their services to demonstrate their investment in your company? Keep looking for ways to create meaningful partnerships.
Ultimately, positive engagement fosters retention—something that, in turn, contributes to growth. In short, take care of your customers, and they will take care of you.
Read the infographic from GetCRM below to learn more about these strategies.
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